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How the government tinkers with social security to pay its bills

The United States government has been plunged into one of its recurring financial crises, and the social security system is caught in the resulting turbulence. The financial squall is tied to the problems Congress is having with legislation to balance the government's budget.

The much debated budget-balancing bills also contain authorization for the Treasury to borrow more money. The government already has borrowed up to the $1.824 trillion limit allowed under law. So until the US House and Senate can agree on a budget-balancing plan, the government will be scrambling to pay bills.

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Here are questions and answers explaining government's financial moves: Why is social security linked to the debt crisis?

Social security tax receipts are invested in government securities and are part of the government's debt. Thus, tinkering with social security could put the government under its debt limit.

Social security pays out $15 billion every month to retirees and other beneficiaries and takes in slightly more than $15 billion in payroll taxes. So in any effort to find financial wriggling room for Uncle Sam, social security is a candidate. What steps has the Treasury taken regarding social security?

It has taken two. Starting in September it stopped investing social security tax receipts in government securities. Instead, the Treasury used the funds to cover the government's bills.

Second, on Friday the government redeemed or disinvested $13 billion of the government securities held in the Social Security Trust Fund. That lowered the amount of US government debt outstanding and let the Treasury borrow a like amount from investors. The newly borrowed money was used to cover social security checks over the weekend.

Normally, the government pays social security checks out of funds it has on hand and then is reimbursed as social security tax receipts flow in. Have these maneuvers been tried before?

On several occasions Treasury has delayed investing tax receipts to avoid exceeding the debt limit, John Niehenke, acting assistant Treasury secretary recently told Congress. Previous disinvestment has been done only to cover a shortfall in social security tax receipts, not to help the government with its debt-limit problems, social security experts say. Will monthly benefit checks be affected?

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The checks mailed on Friday will be honored, a social security spokesman says. Other sources note that if the government financial crisis is not solved, there may not be sufficient funds to cover social security checks due to be sent later in the month -- for example to those who have just signed up for benefits. Will the social security system's financial soundness be affected?

Not in a major way over the long run. The system is expected to run large surpluses well into the 1990s. But the maneuvers may cost the system some short-term interest income. Failure to invest receipts as they flow in will cost $70 million in October alone. Disinvesting funds from the Social Security Trust Funds early cost the system $10 million last week. The Congressional Budget Office says the cost could be as much as $1.1 billion over a five-year period. Are other government programs being affected?

They may be. The government is expected to decide early this week whether it will begin postponing payments to individuals and firms doing business with the government and to state and local governments. White House spokesman Larry Speakes said Monday, ``At the moment, there is no decision by the President'' on any such deferrals.

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